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After seven years and nearly $100 million in investment, the New Economy Initiative has figured out the types of projects that will give it the most bang for its buck.

In its second round, NEI plans to direct new funding primarily to agencies providing supportive services to spur innovation and entrepreneurism in the city of Detroit — areas it honed in on two years ago.

"Entrepreneurship and innovation, as stand-alones, are valuable in growing the economy," said NEI Executive Director Dave Egner. "But the more we can connect them, the greater we can accelerate each.

"In the end, without innovation, there are no new ideas to commercialize. And without entrepreneurs at the ready, there's no one to commercialize them."

NEI's initial funders and one new foundation have committed a second-round investment of $33 million toward a $40 million target, Egner told Crain's last week.

NEI spent two years studying different approaches to building the regional economy before focusing support in three broad areas: researching the region's assets, developing its workforce and supporting entrepreneurism.

In 2011, it narrowed its grants even further, funding entrepreneur and innovation services exclusively through grants made to organizations including the Henry Ford Innovation Institute, ProsperUs, Tech Town's retail boot camp and Wayne State University's tech transfer office.

Over the past five years, those grants have spurred 716 patents and invention disclosures, 675 new Southeast Michigan companies and 8,000 jobs, according to NEI.

Those results came despite the recent downturn that brought higher unemployment, less available capital and scrambling in the public sector to figure out safe investments, Egner said.

NEI has a strong Detroit focus in its second round of grants. Egner said the majority of the new grants will go to agencies within a 4.3-square-mile radius of Detroit's urban core.

That area is becoming the new center of gravity for the region, where innovation, entrepreneurism, talent and investment are clustering, Egner said.

But NEI sees itself playing a significant role in connecting that work with neighborhoods aligned with the Detroit Future City Strategic Framework and with innovation champions around the region, including Ann Arbor Spark, the Macomb-Oakland University Incubator and Automation Alley.

NEI hasn't yet made grant commitments from round two. But it's rolling $10 million in first-round funding to continue its support of organizations working on innovation and entrepreneurism.

Power of 9

Nine of the original 10 foundations supporting the initiative and one newcomer, the William Davidson Foundation, are participating in the second round. The last of the initial funders, the Skillman Foundation, also plans to make a commitment but hasn't yet finalized it, said Egner, who is also president of the Hudson-Webber Foundation, one of NEI's funders.

NEI's early goal for the second round of funding was more than $40 million, but the foundations were more comfortable with three-year commitments that provide an opportunity to review the work that has been accomplished with funds from round two and whether future investments are needed, Egner said.

Many of the NEI funders are the same ones participating in the fund to help shore up Detroit's underfunded pension plans, protect the Detroit Institute of Arts' collection and hasten the city's emergency from bankruptcy.

Egner said NEI is talking with local corporations to raise the balance of the funds.

"Our learning said culture change is going to take more than diversifying the economy" beyond manufacturing and automotive, Egner said.

"These next three years are about making the (entrepreneurial) ecosystem stick."

Building, attracting talent

A $2.5 million grant from NEI enabled the Detroit Economic Growth Association, a nonprofit affiliate of the Detroit Economic Growth Corp., to provide startup financing for 15 businesses downtown, said Olga Stella, vice president of business development at the DEGC.

Through the Creative Corridor Incentive Fund, those grants helped attract both a range of companies — including Lowe Campbell Ewald; Lambert, Edwards & Associates; and GalaxE.Solutions — and the smaller creative businesses in the Madison building, she said.

Collectively, the 15 companies occupied 457,000 square feet, created 1,400 jobs and leveraged $51 million in more investment to launch Detroit offices.

During the grant period between 2009 and 2011, it was hard for creative businesses to get the conventional financing to make building improvements or bridge some of the other costs needed to move into downtown buildings, such as parking costs, Stella said.

There's still a need for this kind of funding, she said.

"We're definitely riding an upward momentum, but there's still a gap in available capital."

The Fisher Foundation recommitted to NEI both in the spirit of collaboration and because "we feel strongly about how this work connects to the neighborhoods outside the central corridor," said Executive Director Douglas Bitonti Stewart.

Outside of its participation in NEI, the foundation has been supporting early childhood education and basic needs in Detroit's Brightmoor neighborhood for the past six years.

"There's a recognition of the fact that for the city to continue this positive momentum, it's going to take place both in the central core and in the neighborhoods," he said.

NEI demonstrated value in its first seven years, said Kresge President Rip Rapson.

Its efforts are helping attract businesses and talent into Detroit, to create some of the preconditions those businesses needed to get anchored there and to create a broader network of innovation and creative activity throughout the city — not just in Midtown, he said.

"The challenge going forward in the next round," Rapson said, "is the extent to which we can take these successes and make them more broadly applicable to the rest of the city."